Three Worker's Comp Insurance Mistakes That Small Businesses Make
As a small business owner with a few employees, you likely need to watch the budget closely. At the same time, you don't want to scrimp in the wrong places. For example, trying to cut costs when in comes to your worker's comp insurance can cost you more in the long run, especially if you are sued by an employee. The following are some worker's comp mistakes you need to avoid.
#1: Defining your staff improperly
You only need to carry worker's compensation on your actual employees. Subcontractors are exempt and they cannot make claims against your worker's comp insurance. Yet, if you don't follow the rules of hiring a subcontractor, you could get stuck paying. Any subcontractor doing work for you onsite must provide you with a certificate of proof that they are self insured. If you don't have this on file and you are audited by the insurance adjuster, you may be responsible for paying for worker's compensation for the period of time the subcontractor did work for you. In fact, there may even be some fees involved for late payment.
#2: Skipping claim planning
No matter how safe your workplace or careful your staff, injuries can still happen. Your goal is to minimize your overhead cost for when a claim is made. Generally, your rates can go up the higher the claims that are made. One way to minimize claim amounts is to have plans in place to bring workers back onto the job during recovery. This can be as simple as training all of your staff to perform multiple jobs so that they can step into different roles depending on ability. For example, if you have warehouse staff that is also trained to drive, then an injured warehouse worker can temporarily switch to a less physical driving position as they heal. Since the injured staff member is still earning a check, their claim amount is lowered.
#3: Not creating an accurate budget forecast
Most worker's comp plan costs are based upon the overall payroll for the business for the upcoming fiscal year. Depending on the plan, you may have to make payments annually or quarterly. If you do not come up with an accurate payroll budget forecast, you may end up owing your insurance company a large payment at the end of the insurance period. This occurs when your company payroll is higher than the forecast amount. Try to stay as accurate as possible. In fact, if you bring more staff on, drop staff, or give out raises that cause a major impact on your payroll, rework your budget forecast and contact your insurance company right away to adjust your plan.
For more help, talk with a worker's compensation insurance agent.